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CIRCULAR No.50A-TC/TCT OF JULY 31, 1997 PROVIDING FOR THE TEMPORARY APPLICATION OF IMPORT TAX RATES FOR COMPONENTS AND DETAILS IMPORTED FOR THE MANUFACTURE AND ASSEMBLY OF PRODUCTS NOT YET REGULATED BY STANDARDS OF ASSEMBLY IN THE FORMS OF SKD, CKD AND IKD

Pursuant to Decree No.54-CP of August 28, 1993 of the Government detailing the implementation of the Law on Import-Export Taxes and the Law on Amendments and Supplements to a Number of Articles of the Law on Import-Export Taxes;

Pursuant to Article 3 of Decision No.280-TTg of September 28, 1994 of the Prime Minister regarding the promulgation of the Import-Export Tax Indexes;

According to the Prime Minister�s opinion in Official Dispatch No.3144/KTTH of June 24, 1997 of the Government relating to the tax policy applicable to certain kinds of supplies for foreign investment projects, and the tax policy for the promotion of the localization of products;

Pending the promulgation of an import tax policy based on the proportion of localization of manufacture and assembly of mechanical, electric and electronic products; after consulting the ministries and branches, the Ministry of Finance provides for the temporary application of import tax rates for sets of components imported for the manufacture and assembly of products not yet regulated by standards of assembly in the forms of SKD, CKD and IKD.

I. APPLICATION SCOPE AND CONDITIONS

1. Scope of application:

This Circular shall apply to mechanical, electric and electronic products being components and details imported by all Vietnamese enterprises or Vietnam-based foreign invested enterprises operating in the field of manufacture and assembly of mechanical, electric and electronic products and accessories not yet regulated by standards of assembly in the forms of SKD, CKD and IKD.

2. Conditions of application:

To be eligible for the provisional policy on the import tax rates for components and details, enterprises must meet the following conditions:

- Having production or assembly technological lines (that meet the prescribed technical conditions and conform to the investment, production and business licenses), already examined and certified by the General Department for Standardization, Metrology and Quality Control.

- The manufactured or assembled products must be granted certificates of products� quality registration by the standardization, metrology and quality control agency.

- Having plans for manufacture or assembly of mechanical, electric and electronic products which have been registered with the customs agency.

II. METHOD OF IMPORT TAX CALCULATION

1. Enterprises meeting all conditions prescribed in Point 2, Part I of this Circular, if importing sets of components and details for the manufacture or assembly of products and accessories not yet regulated by standards of assembly in the forms of SKD, CKD and IKD, shall be entitled to the import tax calculated at the import tax rate set for each component or detail stipulated in the Import Tax Index.

For example: Company A imports a set of complete components for the manufacture and assembly of washing machines, including such parts as motor, electric components, iron cover, belt, electronic control, electric wire, spring, screw and details made of plastic, etc.

The import tax on the above set of washing machine components shall be calculated at the import tax rate set for each detail: motor, electric components, belt, spring, etc. (and the import tax rate set for the group of washing machines shall not apply).

- In cases where one component or detail may be classified into two or more coded groups of item subject to different tax rates, the determination of the code and import tax rate for import tax calculation shall comply with the current provisions of the Import Tax Index and the principles of classifying coded groups according to the Harmonizing System (HS) promulgated by the General Department of Statistics.

2. In cases where the total import tax amount calculated on each component and detail as prescribed in this Circular is higher than the import tax amount calculated on a complete unit of product made of such components and details, the tax calculation at the import tax rate set for the complete unit of product shall apply.

3. With regard to goods items already regulated by the import tax rates set for SKD, CKD and IKD forms (cars, mortobikes, refrigerators, internal combustion engines, electric components), the current provisions on the calculation of import tax at the tax rates set for SKD, CKD and IKD forms shall still apply.

III. ORGANIZATION OF IMPLEMENTATION

1. Registration and ratification of dossiers

Enterprises engaged in the manufacture and/or assembly of products and accessories shall submit to the customs office (at the place where the import procedures are completed) a dossier for registration of the import of components and details for the manufacture and/or assembly, that includes:

- The investment, production or business license (suited to the commodities manufactured and assembled from imported mechanical, electric or electronic products applied for the calculation of import tax on components and details).

- The certificate granted by the General Department for Standardization, Metrology and Quality Control showing that the production or assembly technology lines meet the prescribed technical criteria.

- The certificate of the product�s quality registration.

- The report on the yearly manufacture and assembly plan; the import plan and quota set for each detail and component to be imported for the manufacture and assembly of products and accessories in the year and the names of the manufactured and assembled products.

Relying on dossiers submitted by enterprises, the customs offices shall consider and allow them to enjoy the import tax calculated according to details and components. At the same time, books shall be opened to record the import of components and details and the final accounts.

2. Monitoring and making final accounts of import goods:

a/ Monitoring import goods: When importing components and details, an enterprise shall make a full declaration of each component and detail and the import price thereof and open a book to record the import goods in accordance with Customs guidelines. The General Department of Customs shall provide guidelines for the local customs offices to monitor the import goods, thus creating favorable conditions for the enterprise and avoiding the taking of advantage of the import of goods for manufacture and assembly to evade import tax.

b/ Making final accounts of import goods: Annually, not later than March 1st of the following year, enterprises shall make a summary report on final accounts of the import, manufacture and assembly situation of the previous year and submit it to the customs offices, with the following contents: the import volume; the amount of goods already used for manufacture and assembly; the number of manufactured or assembled products; the amount of goods to be transferred to the next year; the amount of goods having been ceded or used not for the purpose of manufacture or assembly of products and accessories.

Relying on the report of final accounts of enterprises, the customs offices shall assume the primary responsibility and coordinate with the local taxation department in inspecting and settling the enterprises� accounts. All cases of failure to abide by the regulation detected through inspection shall all be subject to the payment of import tax arrears at the tax rates set for complete units of products (or for components and details in cases prescribed in Point 2, Part II of this Circular) in accordance with the Import Tax Index and the current provisions.

After 30 days from March 1st of the following year, if an enterprise fails to report on its final account (without any plausible reason), the customs office shall not allow the enterprise to enjoy the tax rates set for components and details prescribed in this Circular with regard to its subsequent lots of goods.

IV. EFFECT OF IMPLEMENTATION

This Circular takes effect from August 15, 1997.

Cases arising prior to the date when this Circular takes effect shall be considered and handled saparately by the Ministry of Finance. In the course of implementation, if any problem arises, agencies and units should promptly report it to the Ministry of Finance for appropriate settlement and additional guidances.

For the Minister of Finance

Vice Minister

VU MONG GIAO